In the new issue of Regulation, economist Pierre Lemieux argues that the recent oil price decline is at least partly the result of increased supply from the extraction of shale oil. The increased supply allows the economy to produce more goods, which benefits some people, if not all of them. Thus, contrary to some commentary in the press, cheaper oil prices cannot harm the economy as a whole.

Two long wars, chronic deficits, the financial crisis, the costly drug war, the growth of executive power under Presidents Bush and Obama, and the revelations about NSA abuses, have given rise to a growing libertarian movement in our country – with a greater focus on individual liberty and less government power. David Boaz’s newly released The Libertarian Mind is a comprehensive guide to the history, philosophy, and growth of the libertarian movement, with incisive analyses of today’s most pressing issues and policies.

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Commentary

Repeal the Grave Robber Tax

By
Stephen Moore

February 22, 2001

Because some people are really wealthy doesn’t mean they are well endowed with common sense. Last week a handful of the richest people on the planet, including George Soros, Warren Buffett and Paul Newman, urged Congress not to end the death tax. More than 100 other rich people took out an ad this past weekend in The New York Times essentially saying, “Please tax us!” Estate tax advocates in Washington are exulting that even the nation’s yacht-owners don’t want this tax repealed.

The truth is that these ultra-rich Americans aren’t being as selfless as it may seem. Most billionaire families long ago engaged in careful estate tax planning by, for example, depositing their fortunes into family foundations or by creating generation skipping-trusts — to avoid having the long arm of the IRS reach into their graves for a dime.

Let’s take the example of George Soros. According to research by Brett Fromson of TheStreet.com, few Americans have been so successful at gaming our tax system as the billionaire financier. Many of Soros’ investments are “off-shore” hedge funds often exempt from U.S. taxation. “Soros can afford to support high inheritance taxes,” writes Fromson, “given the enormous personal income tax advantage he enjoys.” I have no objection to Americans engaging in legal tax avoidance. It’s smart personal finance. But Soros shouldn’t turn around and hypocritically urge other people to pay more taxes when he finds so many clever ways to avoid U.S. taxes himself.

The dirty little secret of the death tax is that the people clobbered by it are not billionaires. More often they are ordinary Americans with medium sized estates — the millionaire next door. I am talking about ranchers, farmers and self-starter business owners. They are the risk-takers in our society who have spent a lifetime pouring sweat equity into their family-owned firms. They become anguished and enraged when they discover that their reward for a life of virtue is a confiscatory death tax that will rob their grave. Every year thousands of heirs are forced to sell the family farm or business to pay estate taxes. It’s unjust given that this tax is imposed on dollars already taxed when the income was earned during the deceased’s lifetime.

Now, Warren Buffett worries that without a death tax America will become a society of pampered third- and fourth-generation inheritors hoarding their family fortunes without working an honest day or contributing to society their whole lives. (The image of Ted Kennedy jumps to mind.) But as Professor Edward McCaffery of the University of Southern California Law School argues, “If breaking up large concentrations of wealth is the intention of the death tax, then it is a miserable failure.” The Kennedys and Rockefellers still have massive family fortunes despite the estate tax.

The death tax rewards the life of lavish and unproductive consumption it is intended to discourage. This tax says to the elderly: Live high on the hog. Wrap yourself in material comfort. Eat, drink, be merry. You can’t take it with you, and you can’t leave most of it to your kids. Your goal is to die broke — the ultimate form of tax avoidance. Meanwhile the frugal men and women who scrimp and save and build a legacy to leave to their children are hit by a tax that allows the IRS to snatch more than half. Through the death tax, we reward vice and punish virtue.

One last argument used by the billionaires is that eliminating the death tax will cause private charities to suffer. But volumes of evidence show that charitable giving is more influenced by the amount of economic growth than the value of charitable tax deductions. In the 1980s, the value of charitable deductions fell by almost half, but charitable giving soared. It’ s insulting to say that Americans give to their churches or the Red Cross or the Salvation Army because they want a tax break.

Although we consider ourselves the freest nation on earth, we have the second highest death tax in the industrialized world — higher than in the socialist bastions of Sweden and France. Perhaps that’s why Hillary Clinton, campaigning for the Senate last fall, said, “You ought to be able to leave your land and the bulk of your fortunes to your children and not the government.” Three out of four Americans agree with her.